As we all know, if we are to avert the worst of the climate and ecological crisis and build a more equitable world, we urgently need to accelerate progress towards a sustainable, zero carbon, inclusive economy. This means wholesale transformation of every sector, fast, and restructuring the global economic system itself.
As was so evident at COP26 recently, unlocking the power of financial markets to accelerate investment in the new infrastructure and technologies required, including by providing insightful, comparable and relevant ESG disclosures to investors and increasing the cost of capital for polluting and damaging businesses which are not on a transformation pathway, is key.
All IFC jurisdictions are conduits for global investment and have a responsibility to leverage their expertise and capital to this end. Centres for alternatives, such as Jersey, have a role in providing private finance through asset classes such as venture capital, private equity, private debt, infrastructure, and real estate to take the solutions we need to scale.
Jersey takes this responsibility seriously and earlier this year launched Jersey for Good, which is Jersey Finance’s strategy for sustainable finance. Developed with inputs from across the local industry, the goal is for Jersey to be recognised by its clients, key stakeholders and other partners as the leading sustainable finance centre in the markets it serves.
The goal is an ambitious one, implying industry-wide mainstreaming of sustainable finance rather than a sustainable market segment alongside business-as-usual. But that is exactly what is needed given the pace, urgency and connectedness of the challenges and how markets are responding to regulatory and investor pressure. *PwC’s analysis suggests that 60 per cent of European mutual assets will be ESG aligned by 2025. More recently, PwC’s Global Investor Survey published in October shows that 79 per cent of investors now consider ESG risks an important factor in investment decision-making, whilst 49 per cent would now be willing to divest from companies that aren’t taking sufficient action.
So, what practical action is Jersey taking to realise this goal? The island’s industry has been active in this area for some time and has solid foundations upon which to build. For example, The International Stock Exchange (TISE) has had a green segment since 2018, recently relaunched this year as TISE Sustainable, a partner exchange of the UN’s Sustainable Stock Exchanges initiative. Moving forward, here are five key features of Jersey’s approach this year:
So, what’s next? Jersey, like all IFCs, is on a sustainable finance journey. As we reflect on the outcomes of COP26 in particular, here are five themes IFCs should consider going forward. All of these represent significant growth opportunities, but failing to pursue them could also spell the demise of IFCs which do not stay relevant:
These are exciting times for the evolution of IFCs as conduits for sustainable finance. IFCs such as Jersey all need to continue to build their capacity and capability to harness the opportunities. There will be winners and losers in the race to a more sustainable future, and IFCs all need to ensure they stay relevant and reinforce their reputation as good global actors.
ESG & Net Zero Director and Jersey Finance Sustainable Finance Steering Committee member.